How to Boost Your Credit Score: Essential Strategies for Financial Health

Improving your credit score is a vital step towards better financial health. Having a bad credit score comes with a variety of risks and downsides, but 'fixing' a poor credit score isn't always easy. To boost your score, you need to identify the highest-impact changes you can make in your behaviour, to show to credit providers that you are a safe bet for their money. Here are 10 key strategies you can follow to boost your score:

• Prioritise Paying Your Bills on Time: Your payment history is a major factor in your credit score. Make sure you pay all your bills on time, including credit cards, loans, and utility bills. Setting up reminders or automatic payments can be helpful. From your credit report, you will be able to identify on which accounts you have fallen behind on payments or not paid balances on time. When you find any such accounts, you should ensure you pay the full instalment owing on the account as soon as you can. Pay your bills on time for a number of months in a row, and you'll start seeing your credit score improve.
• Reduce Debt and Credit Utilisation: Your 'credit utilisation' is the percentage of your available credit that you use. It's counterintuitive: ideally you should have a lot of credit available to you, but use very little of it. The lower your utilisation, the better. Keeping your utilisation below 30% is ideal. For example, if your credit card has a limit of R100 000, you should always try to keep your actual utilisation below R30 000. You can ensure lower credit utilisation by paying your debt down strategically, for example with the snowball method.
• Keep Old Credit Accounts Open: The length of your credit history affects your score: longer is better. Keeping older credit accounts open, even if you don’t use them often, can be beneficial as it demonstrates a longer credit history. If you combine this with low utilisation, that's even better.
• Limit New Credit Inquiries: Because credit providers check your credit score before lending you money, each time you apply for credit will result in a "hard" inquiry. Hard inquiries are regarded as bad omens for credit providers: having too many of them in a short period of time may indicate that you're too hungry for new credit, or that your financial situation has changed significantly. By the same token, you should be weary of applying to many different providers at the same time, because this will cause a bunch of hard inquiries in short succession. This doesn't mean you shouldn't "shop around" for credit. It's fine if you go through a patch where you have many inquiries, for example when comparing home loan offers, as long as this doesn't become the norm.
• Diversify Your Credit Mix: Having a mix of different types of credit (e.g. car loan, credit card, and home loan) can positively impact your score. That said, this is not a major factor, so you shouldn't open new accounts just to diversify, if you don't need them.
• Check Your Credit Report For Errors Regularly: Obtain your credit report from the major credit bureaus using Debt Sage's free tool and review it for errors. Inaccuracies can cause major headaches. Dispute any inaccuracies you find as soon as you can.
• Pay-Off Collections and Past-Due Accounts: If you have any accounts in collections or past their due date, focus on paying these off. While the impact of past mistakes will lessen over time, paying off these debts can still positively affect your score. Pay off any amounts owing from negative information on your credit report, such as judgements or administrative orders from the courts.
• Seek Professional Help if Needed: If you're struggling to manage your debt, consider consulting a credit counsellor. They can provide advice and help you develop a plan to improve your financial situation. Reach out to Debt Sage if you need help.
• Use Credit Responsibly: Use your credit cards responsibly. This means not maxing out your cards and trying to pay more than the minimum payment each month.
• Be Patient: Improving your credit score is a process that takes time. Just like running or weight training, consistency is key. Keep up the above strategies for 2-3 months, and you'll start seeing results.

Building a better credit rating doesn't happen overnight. It requires patience, discipline, and a consistent effort to manage your finances responsibly. By following these essential steps, you're setting the foundation for a credit score that will serve you well in all your future financial endeavours.